C. H. Robinson Worldwide, Inc. Q1 FY2021 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson First Quarter 2021 Conference Call. As a reminder, this conference is being recorded Tuesday, April 27, 2021. I would now like to turn the conference over to Chuck Ives, Director of Investor Relations. Please go ahead.

Thank you, Donna, and good afternoon, everyone. On the call with me today is Bob Biesterfeld, our Chief Executive Officer; and Mike Zechmeister, our Chief Financial Officer. Bob and Mike will provide a summary of our 2021 first quarter results, and we will then open the call up for questions. This change to live Q&A from our previous practice of responding to pre-submitted questions is in response to valued input from our analysts and shareholders.

Thank you, Chuck, and good afternoon, everyone. We're proud of our first quarter results. As global shipping markets remain disrupted, our team around the globe stayed focused on serving the needs of our customers and delivering innovative solutions to keep global supply chains moving. During the quarter, we delivered strong financial results while continuing to deliver against many of our initiatives related to growth, productivity and the advancement of our digital strategy. I'll highlight some of these areas of progress as I walk through my prepared comments surrounding our Q1 results. In the first quarter of 2021, we generated 125% growth in earnings per share due to profit growth in our two largest business segments, North American Surface Transportation and Global Forwarding. Our NAST business generated double-digit growth in both adjusted gross profits, or AGP, and operating income in the quarter. NAST AGP per business day increased 15%, and operating income was up 39% compared to the first quarter of last year. These results were driven by a 23% improvement in AGP per truckload in our truckload business, coupled with continued strong market share gains in our less-than-truckload business, where volume per business day increased 17% year-over-year. Bolstering these results were continued benefits of our technology investments, which continue to unlock productivity gains and deliver customer value in new and exciting ways. The macro environment in the first quarter continued to be one of tight capacity and increased pricing in the marketplace driven by several supply-side constraints, including the ongoing challenges of driver availability, coupled with robust demand. The weather events in February demonstrated how quickly supply chains can get disrupted in this capacity-constrained environment. For the quarter, our NAST truckload volume was down approximately 6.5% or 5% per business day compared to the first quarter of last year. While our business in the spot market increased significantly, our volume in the contractual business declined as we continued to pursue profitable volume growth by reshaping our portfolio through repricing the book of business with new and existing customers.

Thanks, Bob, and good afternoon, everyone. As Bob mentioned, we delivered solid financial results during the quarter due to strong profit growth in NAST and Global Forwarding despite lower truckload volume in NAST, where we work to improve AGP per load by addressing unprofitable loads in the tight freight market. Our total company AGP per business day was up 26% compared to Q1 of 2020, driven by performance from our ocean and truckload service teams. As a reminder, our first quarter had one less business day compared to Q1 of last year. On a sequential basis, all of our business segments and service lines delivered increased AGP per business day compared to Q4. Our truckload service line delivered the largest absolute increase on a sequential basis with a 6% increase in AGP per load and a 4% increase in truckload volume per business day. This sequential volume growth was achieved despite the negative impact of Winter Storm Uri in the U.S., which we estimate had a net decline of 0.5 day of truckload volume and a full day of LTL volume. On a monthly basis compared to 2020, our total company AGP per business day was up 34% in January, up 17% in February and up 26% in March. Q1 personnel expenses were $360.8 million, up 9.3% versus Q1 of 2020, primarily due to higher incentive compensation costs that are aligned with our expected 2021 results. Q1 average head count declined 2.9% compared to Q1 last year, including the Prime acquisition, which added one percentage point. The Q1 growth in our business with reduced head count shows how our technology and process improvement investments are delivering efficiency to our business model. We continue to expect our full year 2021 personnel expenses to be approximately $1.4 billion, including the higher incentive compensation, the impact of our ongoing long-term cost savings efforts and the reinstatement of our company match on retirement contributions in the U.S. and Canada, which started on January 1. Q1 SG&A expenses of $118.2 million were down 7.9% compared to Q1 of 2020, driven by reduced travel and improved credit losses. We continue to forecast 2021 total SG&A expenses to be approximately $0.5 billion, including the expectation that travel expenses will build in the back half of 2021 as the impact of the pandemic subsides. 2021 SG&A is expected to include approximately $85 million to $90 million of depreciation and amortization, which is down from $102 million in 2020, primarily due to the completion of amortization related to a prior acquisition. Regarding our long-term cost reduction efforts, through Q1, we delivered approximately 90% of the $100 million per year of long-term or permanent cost savings. We expect to deliver the remaining $10 million of long-term savings by the end of Q2. In the back half of 2021 and beyond, we will continue our long-term cost savings efforts, primarily through process redesign and automation across the enterprise. Our first quarter adjusted operating margin was 31.8%, an increase of 1,250 basis points compared to Q1 last year, primarily due to the increase in adjusted gross profit and success of our cost savings efforts. The Q1 adjusted operating margin delivered on our 30% long-term enterprise margin expectation. Our first quarter effective tax rate was 18.3%, up from 17.1% in Q1 last year, due primarily to the higher income this quarter. Recall that our first quarter typically has a lower effective tax rate due to the tax benefits related to the delivery of our annual stock-based compensation in the quarter. We continue to expect our 2021 effective tax rate to be 20% to 22%, assuming no 2021 impact from changes to U.S., state or international tax laws. Q1 net income was $173.3 million, up 122% compared to Q1 last year. And as Bob highlighted, diluted earnings per share finished at $1.28, up 125% versus Q1 last year. Turning to cash flow. Q1 cash used by operations was approximately $56.7 million compared to $58.5 million provided by operations in Q1 of 2020. The $115 million decrease in operational cash flow versus Q1 last year was driven by a $468 million sequential increase in accounts receivable and contract assets compared to Q4, which was partially offset by a $216 million increase in total accounts payable and the $95 million year-over-year increase in net income. The 17.7% sequential increase in accounts receivable and contract assets was driven primarily by a sequential increase in total revenue that was more concentrated in the last two months of Q1 compared to Q4 as well as the mix shift associated with higher total revenue growth in Global Forwarding, where our DSO runs almost double that of our NAST business. It's important to note that we are not seeing a deterioration in the quality of our receivables. Q1 results included sequential and year-over-year improvements in credit losses and percent of accounts receivable that are past due. Over the long term, we expect working capital to grow at a slower rate than our adjusted gross profit. Q1 capital expenditures totaled $13.5 million compared to $14.7 million in Q1 last year. We continue to expect our 2021 capital expenditures to be $55 million to $65 million. We are seeing solid results from our investments, and we'll continue to prioritize the highest returning technology initiatives on a risk-adjusted basis. We remain committed to our $1 billion investment in technology from 2019 to 2023. We returned approximately $221 million of cash to shareholders in Q1 through a combination of $151 million of share repurchases and $70 million of dividends. That level of cash returned to shareholders represents a 45% increase versus Q1 last year when we paused our share repurchase late in the quarter to assess the impact of the pandemic. During Q1 this year, we repurchased approximately 1.6 million shares at an average price of $92.84 per share. At the end of Q1, we had approximately 6.4 million shares of capacity remaining on our 15 million share repurchase authorization from May of 2018. We continue to be committed to disciplined capital stewardship, maintaining an investment-grade credit rating and returning excess cash to shareholders through dividends and opportunistic share repurchases. Now on to highlights from the balance sheet. We finished Q1 with $218 million of cash and cash equivalents, down $77 million compared to Q1 of 2020. Over the long term, we intend to carry only the cash needed to fund operations and efficiently repatriate excess cash from foreign entities. We ended Q1 with $968 million of liquidity comprised of $750 million of committed funding under our credit facility, which matures in October of 2023, and our Q1 cash balance. Our debt balance at quarter end was $1.34 billion, up $250 million versus Q1 last year. Our net debt-to-EBITDA leverage at the end of Q1 was 1.3x. I'll close by saying that I have great confidence in our team and their ability to build on the solid results from Q1 by continuing to execute our plans that generate sustainable long-term growth in our total shareholder returns. Thank you for listening this afternoon, and I'll turn the call back over to Bob now for his final comments.

Great. Thank you, Mike. So as I said in my opening comments, we're proud of the results that we delivered in the first quarter. We delivered record revenues, adjusted gross profits, net income and EPS relative to all past first quarters. We grew adjusted gross profit in the quarter by 24%, while operating expenses increased by less than 5%. This demonstrated the strength and the earnings power of our non-asset-based business model. Looking forward, we'll stay the course with our strategy of pursuing market share gains that align with our profitability expectations, and we'll continue to invest back into the business in order to drive innovation and improve service to our customers and to our carriers. Within our NAST business, based on what we know today, we expect tight market conditions to continue through the balance of the year. But regardless of how cyclical market conditions change and evolve, we'll stay focused on driving growth and expanding our business with customers across our global suite of modes and services. We're very pleased with the results from Global Forwarding, where we've built sustainable competitive advantages through the structural changes that we've made over the last few years. Across the board, as one of the world's largest aggregators of this highly fragmented and diverse carrier base on multiple continents, we're committed to creating better outcomes for our customers and carriers by delivering industry-leading technology that's built by and for supply chain experts. As shippers and carriers continue to increase their adoption of our new digital capabilities, we expect to see continued productivity benefits and to grow market share across our service lines as we create value for customers in new ways. As an organization, we're committed to continuous improvement, driving further efficiencies into the model and leveraging our unmatched combination of experience, scale, technology and information advantage to create better outcomes and to unlock growth. We're also firmly committed to being a responsible corporate citizen, and we're proud of the tools that we can now offer to advance sustainability across the logistics industry. Over the past year, all of our lives have been challenged in unforeseen ways, and the priority to build more flexible and adaptable supply chains is a top priority for shippers and receivers globally. We're uniquely positioned as an organization to offer solutions and to innovate by leveraging our non-asset-based business model, our global suite of services and the most capable team of supply chain experts in the world. The team at Robinson is excited by the opportunities in front of us and committed to providing solutions to the most difficult challenges facing our industry. Lastly, I'd like to thank the team at Robinson around the world for continuing to drive our company forward and to help us emerge stronger. This concludes our prepared comments. And with that, I'll turn it back to Donna for the live Q&A portion of the call.

Our first question is coming from Jack Atkins of Stephens.

I guess, Bob, first question's for you. When I think about the volume decline of 6.5%, I guess it's more like 5% to 5.5% on a per business day within the truckload operations in the quarter. And I understand it's against a more challenging year-over-year comparison in the first quarter. How do you think about when we're going to see an inflection in volume growth? The productivity gains are there and they're real. We can see them in the slides that you're presenting. Is it a head count issue? Do you need more folks to be able to attack the volume? I guess one of the biggest pushbacks I get from investors is they're just struggling to understand why such a strong transactional market isn't translating into more robust volume growth for C.H. Robinson. Can you help explain what's sort of limiting that for you guys over the last several quarters?

Thanks, Jack. It's a great question. The volume per day was down about 5%. It's a relatively difficult comp. Q1 of 2020 was our third highest truckload volume on record. But if you look just at the spot market business, we had robust growth in the spot market, double-digit growth in that space. The shift between contractual and spot is an important one. I want to talk about the efforts that we took to reprice our contractual business in the fourth quarter and in the first quarter and, frankly, ongoing into the second quarter. I'll start with pricing. If we look back to where we were in the back half of 2020, we had negative files at a record level. Some 15% of our loads were resulting in a negative outcome. That cost us somewhere north of $100 million in the back half of last year in negative adjusted gross profit. We had to address that and target a yield and an adjusted gross profit for our contractual business that was more sustainable. The second piece is that as we thought about where the markets were going to unfold in 2021, we had to take a position. We sell long largely and buy short. We believe there's some sustainability to the market we're in right now, given the driver shortage, given some delays on the order-to-build and the delivery cycle on Class 8s, given continued inventory restocking, and given the upcoming produce season. Through our bidding activities in Q4 and into Q1 in the contractual, we took a position believing that to be correct. That impacted us somewhat negatively in terms of our awards on a year-over-year basis with some customers. We improved our adjusted gross profit per shipment in Q1 about 23%, significantly off the trough of Q3 last year, and we're back into a more normal range of adjusted gross profit per load. As the quarter has progressed, the market seems to be coming back a bit to our thesis. It now appears, at least based on where we sit today, that this market does have some legs. We're seeing opportunities come back to us either through the spot market or the gap between spot and contractual, where we can provide dynamic pricing, and we're also seeing contractual opportunities come back to us with a more favorable AGP profile that's sustainable for us to help those customers through the next year. I had many customer conversations, and we wanted to put pricing in front of our customers that we could stand behind, that were good for us and for the customer, without transferring the risk at the level we did in 2020 because that number of negative files and outcomes simply wasn't sustainable.

Okay. That definitely helps clarify that. Just as a follow-up, do you feel like now the market is coming back to you? Do you feel like you're at a point where volume growth can turn positive, and you've eliminated a lot of the issues around these negative files? As we look prospectively with the strong freight market at our back, should we be expecting truckload volume growth beginning in the second quarter?

We absolutely expect truckload volume growth through the balance of this year, Jack. The comparisons are a little wonky as we go through the next few months given the impact of the pandemic last year, but we do expect to deliver truckload volume growth through the balance of the year.

Our next question is coming from Todd Fowler of KeyBanc Capital Markets.

Thanks for going back to the live format. Bob, just piggybacking on Jack's question. I think coming into the first quarter, you talked about $1.6 billion of the book being up to reprice. Can you talk about how much of that progress you had made in Q1 and also where you're seeing contract pricing come in at? And is it at a level right now where it's exceeding where the spot market is?

Thanks, Todd. It's good to be back in the live Q&A format. If I think about the contractual market or our book of business, we believe that we have priced and implemented about half of our contractual business in what I'll call current pricing, delivered in either fourth quarter or first quarter of this year. We've priced more that hasn't quite gone live yet, and we'll continue to price more in the second quarter. Based on our forecast run rate right now, by the end of the second quarter, we'll have about 75% to 80% of our contractual book repriced in either fourth, first or second quarter. So for practical purposes, we'll call that current truckload market pricing.

Okay. Got it. That helps. And then that's at a level that's exceeding where the spot market is right now or at least it's more current with where industry pricing is?

I would call it more current with our thesis of where we see the market going and where we see the market today. The spot market continues to pull the contractual market up and not necessarily down. It's our expectation that over time, as routing guides continue to perform better given the increase in pricing, perhaps the spot market does drop below the contractual market. But that's yet to be seen.

Understood. And then just for my follow-up, the slides are helpful on the productivity gains. Do you think that NAST is at the point where volume growth can permanently outgrow head count growth? And what are your expectations for NAST head count for the remainder of the year?

We do think that over time NAST volume in aggregate will grow at a pace above head count growth. There may be times where we need to add some head count to fuel opportunity in certain pockets of the business, and that's not a forecast of significant head count adds, but there could be quarters where the two things come closer together or move further apart. Over time, the long-range goal of growing volume ahead of head count is applicable for NAST as well as forwarding. We would anticipate head count being relatively flat in NAST for the balance of this year.

Our next question is coming from Thomas Wadewitz of UBS.

I wanted to get your thoughts on the progression in NAST. If I go back to 2018, and I know it's not a perfect analogy, but it's kind of the best prior cycle year I think of, you tended to build stronger net revenue growth as you priced up more of the contract business. Since the challenges of third quarter last year, you have been building momentum in terms of gross profit per load. How do we think about that in second quarter, third quarter? Would you expect further momentum in terms of net revenue growth in NAST driven by higher contract rates or other factors? How would you look at the next couple of quarters?

The comparison to late 2017 into 2018 is an important one, and I agree with the two cycles we can refer to. If I think about Q1 of 2018 compared to Q1 of 2021, customer pricing's up about 12% and carrier cost is up about 15% over that period. While that's higher than the trailing run rate on rate and cost, it doesn't necessarily feel like a bubble in pricing. If you go back to our results in 2018, where our adjusted gross profit per load is today is much more reflective of back half of 2017. You did see that build through that cycle as the cost of purchased transportation started to drop in back half of 2018 and first half of 2019. I'm cautious about drawing too many parallels between 2018 and today because there are structural differences. In 2017 and 2018, a lot was built on buying the news around electronic logging devices and the potential disruption they would cause. Today feels more driven by supply chain dislocation, inventory restocking and sustained pressure on hiring and maintaining drivers. I'm not in a position to call how long the cycle will go or in what direction, but those are the parallels I'd draw between the periods.

Okay. That's reasonable. My second question would be how you think about sustainability of the high level of performance in forwarding. You're executing well and the market is giving you a lot of opportunity. Do you think you can stay at the level of gross profit and operating income you produced in first quarter? Can you stay at that level throughout 2021, or is that unrealistic?

Part of why we don't give guidance is the forecasting challenge. We're committed to delivering industry-leading operating margins in forwarding. We've said that a sustainable 30% operating margin is within our reach in forwarding, and we can get there over time. Clearly, the market has been a tailwind. But Mike Short and his forwarding leadership team have done amazing work over the last few years around process standardization, leveraging technology, centralization of pricing, and strengthening relationships with steamship lines and airlines. We've unlocked something special here ahead of where we probably thought we could.

Our next question is coming from Scott Group of Wolfe Research.

Can you give us the monthly net revenue trends for NAST? When I look at NAST's gross revenue, it's up 14%, but truckload pricing's up 33% and LTL volume's up 17%. I know truckload volume's down 6%, but I'm struggling with why gross revenue's not up more.

Sorry, Scott, I'm looking for the monthly here real quick. Let me see if I can get that.

I can ask another. I can ask my second one if you want to come back to that.

Why don't you go ahead? And Mike, if you could find that monthly, that would be great.

On the productivity slide, is there any way to think about shipments per person at LTL versus truckload? Is there a big difference there? Clearly, we're seeing a lot more LTL growth than truckload growth, so I'm trying to understand if that's affecting overall productivity metrics.

The outsized growth in LTL is affecting the blended metric of shipments per person per day. Net of LTL, we removed about 900 to 1,000 heads from NAST over the last couple of years. Taking head count down by about 12% has impacted both truckload and LTL. But no question, the growth in LTL has helped improve that metric.

We provide our company AGP per business day. Company AGP per business day was up 34% in January, up 17% in February and up 26% in March year-over-year.

Our next question is coming from Jason Seidl of Cowen.

A couple of quick questions. One, on the NAST side, how should we think about your third quarter comparison in terms of gross margins? Last third quarter, the pace that spot moved up was something I have never seen before, and I would imagine that impacted your ability to adapt. If spot continues to remain strong but doesn't move up as much as it did last year, should we expect more improvement in your gross margins in Q3 on a year-over-year basis?

Third quarter last year was the trough in terms of our truckload earnings from an adjusted gross profit per load perspective. It was the absolute low point in the last decade. It's likely we would expect improved operating margins relative to that period.

I'd like to switch to forwarding and talk about ocean business. It seems some ocean shipping lines are changing the length of contracts they're giving customers. How does that impact the business going forward?

Our ocean procurement strategy is a blend of long-term and shorter-term commitments. We haven't seen any noticeable impact from stated changes around length and terms of contracts. One byproduct of how carriers have managed pricing is a greater demand for NVOs like us because of the complexity and changes in the environment. We're seeing larger shippers and BCOs come to us to help them navigate the global ocean landscape, which has driven up our average award sizes and the average size of our customers. That's been a positive outcome. We really have not seen a material change in the overall length of our contracts or the blend.

Our next question is coming from Chris Wetherbee of Citi.

I wanted to come back to NAST and ask a market dynamic question. Truckload volume was down, and your margins were impacted by the move in spot rates we saw intra-quarter. You talk about reducing negative loads, but it feels like the combination of loads and margins doesn't square as well as one might expect if you were preserving price and not seeding share. How do you view the competitive dynamics in the brokerage market right now specifically for truckload? Some smaller carrier competitors are managing margins and gaining volume. How do you see yourself in the market and how you can grow into this market?

In Q1 last year, our truckload volume was up about 7.5% against industry dynamics that showed declines, so we had a different starting place. Our primary focus has been on profitable market share gains, evaluating that portfolio and getting adjusted gross profit back to a normal range. In Q1 we saw positive volume growth in January, and then as we implemented newer bids, that started to turn negative in February and March, landing us at about 5% down per business day. We expect to drive volume growth through the balance of this year at appropriate adjusted gross profit per shipment, which we think is the right decision for customers and shareholders. Eliminating swings at that $100 million of negative files from last year is in the best interest of everyone because it wasn't sustainable.

When you think about that approach, particularly the book of business that wasn't profitable, how much do you think that can come back on your network? Or does it mostly get seeded out to others willing to take lower margin business? Is it the kind of business that can ultimately come back to Robinson to drive volume growth in the future?

There's not an easy answer given the number of customers and their different approaches. Some customers may disagree on market direction and cut awards back, and that may result in business moving to others in the short term. But if that doesn't work out for the customer, we're there to step in on the backside. That's driven a lot of the spot market growth in the first quarter, and we would expect that to continue.

Our next question is coming from Bascome Majors of Susquehanna.

Earlier you talked about gross profit per load in truckload looking more like the second half of 2017 than 2018 in a cyclical context. How far below the peak profit period in late 2018 and early 2019 are you tracking now? Is there a potential path back to that level if the cycle and execution conspire in your favor over the next few quarters?

We're within mid-single digits, mid- to high-single digits of that trailing average right now. If you throw out Q3 and Q4 of 2018 and Q1 and Q2 of 2019 as outliers, our business over the last 15 years tends to be much more tightly bound. I don't know that there's an immediate path back to those outlier numbers. Those quarters were unique where costs fell out of the market and we've seen a violent whip back over the last four quarters. We want to get closer to that average and play in a more typical range where margins flex up or down by about 10%, eliminating extreme peaks and valleys.

Regarding contractual business and comments about contract durations possibly getting shorter to clear discussions, how much of your contractual business is on 2-, 3-, 6-month contracts versus the traditional 1-year contracts, and how could that impact cyclical volatility in your margins?

I don't have an exact percent, but it's a much higher percent than we've had at any point in the past. The proliferation of mini-bids and short-term two- and three-month bridge pricing commitments has been more frequent recently than I can recall. I think that's been a good thing for shippers and transportation service providers to derisk in the short term and reach better long-term commitments. I don't want to go on record guessing exact percentages.

Our next question is coming from Bruce Chan of Stifel.

Bob, you talked earlier about fully digital bookings in NAST and uptake on the TPE engine. How do you think about freight forwarding in that context? Is there a goal or the ability to digitize ocean to the same extent? If so, how far behind is forwarding from NAST?

We believe there's opportunity to introduce more digital capabilities between customers and Robinson on the forwarding side. We have not invested significantly in that space up to this point, and it's an area we continue to discuss in prioritizing technology investments where they can have the greatest impact. We think there's a real opportunity, but we haven't gone far down that path yet.

You gave a head count outlook for NAST as roughly flat for the balance of the year. What is that for Global Forwarding this year? And in general, where does that number go long term in Global Forwarding versus NAST?

In forwarding, head count has been down slightly in each of the past five quarters while delivering double-digit growth in ocean and now strong ocean-air growth. Enterprise-wide, we're focused on keeping head count relatively flat this year. Forwarding has been able to keep relatively flat head count even through acquisitions, which speaks to progress on operational uniformity and internal technology. Flat is the general tone. We're not afraid to add head count; we'll do so where it fuels volume growth that exceeds the head count add.

So the expectation would be keeping revenues at an elevated level on top of that flattish base of head count to maintain target margin levels. Is that fair?

Yes. The revenue run rate will play out over the next couple of quarters. We've provided enterprise guidance around personnel expense and SG&A in past quarters of personnel around $1.4 billion and SG&A around $500 million, and we expect that to hold through our forecast. Again, it's about growing volume ahead of head count. We're willing to add head count where we can deliver volume growth in excess of that add.

Our next question is coming from Ken Hoexter of Bank of America.

Thanks for returning to live Q&A and congrats on solid results. Bob, your comments on pricing and spot: are you suggesting we're at or near a peak? You sounded like you were going back and forth on that, saying this may be as good as it gets but also that it may hold a couple more quarters. Thoughts? And what's your percent of transactions that are now fully digital on the NAST side? Can you give more detail on that?

I'm not forecasting whether we're at a peak or not. Everything in our model shows spot market pricing still elevated relative to contractual pricing. In my experience, spot tends to lead contract, which suggests there may still be room for contractual pricing to move higher. Peak might be when spot starts falling beneath contract. On fully automated or fully digital shipments, there's no universal definition. We could give customer-side stats showing full automation while carrier-side stats differ. On the carrier side, fully digital bookings increased meaningfully this quarter with 50% more carriers participating in auto booking functionality in Navisphere Driver and Navisphere Carrier than last quarter. Each week we take a step change in the amount of business moving in a fully digital manner. If I were to estimate, we're probably still below 20% of total truckload volume moving in a fully automated manner with carriers, considering automated booking and auto tenders. That would be my estimate today.

That's great. As a follow-up, if we stay in a tight market for a couple more quarters, how do you think about NAST margins as you progress through that?

We've repriced about 50% of our contractual business by the end of first quarter and implemented that pricing. We'll be at 75% to 80% by the end of second quarter. That replaces older pricing quoted in very different market conditions. As we reprice, that should deliver uplift in AGP per load. The impact of Winter Storm Uri in February showed how dislocating events can be for the marketplace. As we look through the second quarter and consider CBSA road check impacts on carrier costs, Mother's Day rush and the produce season, we'll learn a lot about the fragility or stability of this market and how the capacity network responds. That will set the tone for the balance of the year.

We're showing time for one last question today. Our final question will be coming from Amit Mehrotra of Deutsche Bank.

Bob, a quick question about the weather in the quarter. Did the weather, particularly in Texas, allow you to pull forward some contract repricing? It seemed like a force majeure event. Did that give you an opportunity to revisit contracts earlier? Also, during a crazy period like this, are shippers gravitating more towards asset-based carriers, given the depth of routing guides, and could that explain some market share shifts?

Related to the storm in February, it took a period that is normally a cooling off in the market and drove it out of town, eliminating time when rates typically ease a bit in the spot market. It didn't cause us to call force majeure on any contracts, though it influenced some conversations. If there were wide gaps between pricing submitted in late Q4 or early Q1 and not implemented until later, it brought to life discussions about where we saw the market going and influenced our thinking. We believe we lost about a day of revenue in LTL and about 0.5 day of revenue in truckload, net-net, once we accounted for pull forward and lost shipments. Regarding the thesis that the market is shifting toward asset-based players, we have not seen that. Demand for our services has been robust. I can't think of many instances where we've been excluded from a large bid; it's quite the opposite.

Thanks. As a follow-up, you have a platform to match demand and supply digitally. How do you measure how well you're buying capacity programmatically? How do you identify backhaul capacity or programmatically drive down buy rates and improve margins?

We monitor the buy rates we achieve in the marketplace against a couple of publicly available indices and look at how that moves on our digital bookings versus manual bookings. We continue to tune our engines to keep those things in line. Given our size and freight density, we historically purchase transportation below those benchmarks because we're eliminating many empty miles for carriers, which is better for carriers and customers.

Last follow-up: has volatility over the last year made shippers embrace digital marketplaces more wholeheartedly? And where do you think take rates or gross margins will evolve five years from now as digital-only platforms grow in scale? What's the terminal value here?

From my conversations with customers, none think the future of surface-based transportation is a 100% digital-only play. The volatility of the last year has shown the importance of having very good people, coupled with great technology and a large base of carriers to converge those things. Customers come to us to execute difficult, challenging things in their supply chains where others cannot, and we do that through digital and by rolling up our sleeves to make sure promises are delivered. Digital is part of the story, but not the whole story. Our value is unique, and we'll continue to make the model more digital, but not a digital-only experience. I don't think the terminal value is 5% margins five years from now. We believe the combination of people, technology and scale creates enduring value.

Thank you. At this time, I'd like to turn the floor back over to Mr. Ives for closing comments.

Yes. Thanks, everybody. That concludes today's earnings call. Thank you, everyone, for joining us today, and we look forward to talking to you again. Have a good evening.

Ladies and gentlemen, thank you for your participation. You may disconnect your lines or log off the webcast at this time, and have a wonderful day.